Lactalis strengthens UK foothold

- Last updated on GMT

Related tags: Milk

Lactalis, France's biggest dairy producer, has strengthened its
position in the UK market with the acquisition of the Scottish
group McLelland, maker of the Seriously Strong brand of cheddar,
paving the way for the archetypal British cheese to win a wider
public following across the Channel.

With such well-known brands as President, Rondelé and Société, Lactalis is already well represented on British supermarket shelves - indeed, its UK sales in 2003 were £42 million, mainly from cheese and butter products.

But the addition of Seriously Strong - the UK's top selling cheddar brand - will give it a much more substantial presence. McLelland's sales in the year to 31 March 2004 were £156 million, with profits reaching of £11.5 million, and the company says it is on track to achieve even better figures this year. The price paid for the acquisition was not disclosed.

McLelland has six processing plants in the UK, five in Scotland and one in Wales, producing up to 45,000 tons of cheddar a year. AS well as Seriously Strong, the company makes cheese under a number of other brands, including Isle of Bute, Orkney, Burns truckles, Galloway and McLelland Mature.

With sales of €5.35 billion in 2003, Lactalis is already the leading producer of branded dairy products in Europe, and with operations in 140 other countries, the Scottish cheddar brand is likely to find a new lease of life in markets as far flung as Ukraine, Moldova and Kazakhstan, as well as a few closer to home such as Italy and Spain, not to mention France.

The deal is also likely to see Lactalis expand its range of products available in the UK - until now it had focused primarily on the President brand. McLelland said that the acquisition would not affect its milk purchasing arrangements with First Milk, the leading British producer co-operative, which would continue to supply most of the company's milk requirements.

"Lactalis and McLellands are both family owned companies with a passion for cheese and this was a major determining factor in the deal. We considered a range of options as we sought to ensure the continuing development of McLellands, and we placed a great deal of focus on ensuring that our staff and the dairy producers who supply us with milk, would benefit,"​ the Scottish company said in a statement.

"Lactalis brings opportunity and a reputation for investing in its staff, brands and in its production and packing facilities and it is clear that there is now very significant potential for famous cheeses sold by McLellands in the UK to find their way onto cheese boards around the world.

"McLellands growth will now effectively be turbo charged both on a national basis and internationally."​Cheddar is by far the most popular cheese variety in the UK, regularly purchased by more than 90 per cent of the population and accounting for more than 54 per cent of the total market by value according to market analysts Mintel​.

However, it has also suffered from an increasingly commoditised image, which meant that while actual sales rose by 2 per cent to £900 million between 1998 and 2003, sales at constant prices actually fell by 4 per cent over the same period.

This was what led to the development of brands in a market dominated by own labels, according to Mintel. Brands tend to focus on the mature and vintage cheddar sectors, and have a price premium of up to 17 per cent. Cathedral City from Dairy Crest is the market leader, and branded cheddar as a whole accounted for 15-20 per cent of total cheddar volumes in 2003.

Continental cheese sales, meanwhile, continue to grow, with sales topping £170 million in 2003.

Bongrain invests

Meanwhile, another French dairy group, Bongrain, has announced that it has increased its stake in compatriot Compagnie Laitière Européenne (CLE), buying out the 20 per cent stake previously held by a number of financial investors, including BNP Paribas, Credit Agricole and Credit Mutuel-CIC.

Bongrain, which makes and markets brands such as Caprice des Dieux, now controls 83.9 per cent of CLE through its Alliance Laitière Européenne (ALE) subsidiary. Bongrain first acquired a majority stake in CLE in 1992, and has consolidated its activities since 1999. CLE's leading brands include Coeur de Lion and Elle & Vire.

Related topics: Manufacturers, Lactalis

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